COMMISSIONER OF INCOME TAX Vs. EICHER LIMITED

JUDGEMENT

(1.) THE Revenue is aggrieved by an order dated 9th December, 2005 passed by the Income Tax Appellate Tribunal, Delhi Bench F , New Delhi (the Tribunal) in ita No. 2881/del/2001 relevant for the Assessment Year 1995-96.

(2.) A full time employee of the Assessee called Vishwanathan had acquired, during the course of his employment, specialized knowledge of technology in the two-wheeler industry as well as of managing the dealership of the market place and other specialized knowledge relating to the two-wheeler business. Vishwanathan entered into an agreement with a company called VCPL to the effect that he would promote VCPL and collaborate with it to set up manufacturing facilities for two-wheelers upon his retirement from the Assessee.

(3.) ON coming to know of this, the Assessee negotiated a non-compete agreement with VCPL and Vishwanathan whereby the Assessee paid a sum of Rs. 4 crores to VCPL so that VCPL and Vishwanathan would not carry out any business activity with regard to two wheelers. The Assessee claimed this amount as a business expenditure but it was disallowed by the Assessing Officer.